Warren Buffett Net Worth – How big is it?

In this article we take look Warren Buffett’s net worth, what investing lessons we can learn from the man himself and calculate how much money somebody the same age would have now if they’d passively invested £56 per year over the same time period as Buffett.

It goes without saying that his net worth is a pretty large figure. In fact, it is a staggering $84 billion. That’s about £65 billion pounds sterling at the time of writing and makes him the 3rd richest guy on the planet.

How does Buffett’s wealth compare to Bezos and Gates

He’s just behind Amazon’s Jeff Bezos ($112 B) and Microsoft’s Bill Gates ($90 B). That Buffett earned his fortune through stock picking is a pretty big indication that it just might be possible to beat the market.

I guess all those efficient market theorists out there who think it is impossible to beat the market are still putting it down to luck. However, Buffett has been stock picking since he was 11 years old and is now 88, so that’s 77 years of luck still counting!

If it is not luck, then what’s his secret? In recent, years a lot of tech savvy people have seemingly got rich by investing in Tech stocks like Amazon and Google. Even though he’s been buying lots of Apple stock in recent years, Buffett is definitely not famous for being very tech savvy. He doesn’t have a computer on his desk. He still uses a flip phone and has only ever sent one email in his life. This flies in the face of all those online brokerage adverts that lead us to believe the number of trading screens you have somehow corresponds to your investment returns!

If he’s not spending all day staring at screens full of stock prices then what’s he actually doing? Well in between scoffing McDonalds breakfasts and drinking Coca-Cola he simply digests information. In fact, he spends 80% of his working day just reading and thinking.

This reading and thinking habit has had a profound influence on Buffet’s life. It was after reading a book that Buffett thought to enroll at Columbia University, where he got a master’s degree in economics. The course was taught by the author of the book, Benjamin Graham.

The Influence of Benjamin Graham

Graham was one of the biggest influences on Buffett’s life. He was a British born American economist and professor. He is known as the “father of value investing.” He wrote two iconic investment books: Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949).

The Intelligent Investor has been described by Buffett as the best investment book every written. It introduced lots of valuable concepts to the investment masses, but perhaps the most important was value investing: Using fundamental analysis to determine the price of stocks and then buying ones which appear cheap.

Though Buffett learnt a lot from Graham, their approaches are not exactly the same. Graham’s investments tended to be in undervalued unexceptional companies. Buffett on the other hand, tends to favour high quality businesses that are reasonably priced, but have great growth potential.

Berkshire Hathaway

Using this approach, Buffett began a number of business partnerships, including one with Graham himself. He then began buying shares in Berkshire Hathaway in 1962. It wasn’t long before he was running the company and returning over 20% annually. This lead to Berkshire becoming one of the top five largest publicly traded companies in the world (as of 2017).

It is beyond doubt that Buffett is an exceptional investor. However, the fact that he started so young and consistently invested is the most valuable lesson we can learn from his life. Basically, he bought 6 shares at $38 dollars a piece and the rest is history.

Time and Consistency

That total initial investment of $288 dollars would have been about £56 pounds in 1941. That doesn’t sound like much, but if all those 88 year old British pensioners had passively invested that same amount every year until today I’m sure they’d be pretty satisfied with themselves.

Historic UK stock market returns are 5.5% and inflation has averaged 5.2% since 1941. That’s a nominal return of 10.7%. As a result, £57 invested annually in the UK stock market would have grown to over £1,600,000 today. OK, they wouldn’t have as much as Buffett, but that’s a pretty tidy sum.

Just because something happened in the past doesn’t automatically mean it will happen in the future. Nobody knows if that 10.7% will be repeated. Nevertheless, this just goes to show the power of time and consistency when investing. The magic of compound interest does the rest. Buffett knows this better than anyone. In fact, his advice to average investors is not to try to follow his approach, but instead to buy low-cost index funds consistently with a long term time horizon.

That seems like pretty good advice because though many people have tried, very few have managed to mimic Buffett’s success.